Yen Rose Last Night To 90 To The Dollar!

October 24, 2008

Elaine Meinel Supkis

Happy Birthday to my loving husband day! It is colder outside, Libra is finished and now we enter Scorpio, the constellation of the Goddess of Death. The Derivatives Beast continues to munch away, unstoppable. AIG is demanding more loot because it is a bottomless pit. The übergnome of the planet, Greenspan, admits that he may have had a tiny flaw in his economics plans! HAHAHA. But the real heavy news of the hour is the amazing skyrocketing value of the YEN! It is shooting upwards at an astonishing rate. The Japanese are beyond hysterical about this. They see their doom for it is killing the export trade golden goose!

The derivatives problem is especially ominous. At extreme levels and very dangerous. An estimated $180 trillion held by commercial banks alone meaning those with most of it are technically insolvent. JP Morgan Chase holds half of it. An "unprecedented concentration of risk in modern US history." The large counterparty default risk in this market isn't understood. Currently the Office of the Comptroller of the Currency (OCC) reports credit derivatives exposure (or risk of trading partner default) at $465 billion. Up 159% from 2007. Failure to address the derivatives time bomb "leaves a gaping hole through which financial panic can spread."

In addition, beyond the above lowball figure, no estimates are available of derivatives default amounts or forecasts of more likely in a continuing downturn.

In sum, a monumental problem. Too big to ignore, but precisely what Congress is doing. At enormous risk to the economy, businesses, households, the American way of life, and the nation as the world's economic superpower. Plus the effect on world economies and people everywhere.

A reader sent me this guy's blog. He is a very good read and has quite a resume. So let's give Stephen Lendman a boost! Tell him, he is right! And tell him about the Derivatives Beast and his many adventures in the Bottomless Pit. Oh, I haven't told all that many stories about him? Sorry. He is still germinating in my cartoon mind. But once I am done with all the pre-winter work which eats up most of my time, 8 to 12 hours a day, I will do a whole cartoon series about the Cave of Wealth and Death. How the gnomes raid this place, what the dire female goddesses do about all this and the baby, now grown up Derivatives Beast. And the magical flying piggy bank, of course.

This derivatives business was all about two big things: getting lots of loot via fees which came from passing risk from hand to hand, over and over again. And to eliminate the appearance of risk by pretending that in the end, someone would pay everyone if they lost their bets in world markets of various sorts. So they could do all of this with low, low interest rate loans! From the Bank of Japan. All these elements were in place in 2005 and I talked about them back then. It was pretty easy to see what was going to go wrong, too.

One of the biggest propaganda points being put out by all the players in this noxious game is this huge lie: 'NO ONE KNEW THIS WOULD CRASH AND BURN!!!!' But the internet proves this wrong. True, the people understanding this crash and predicting it were few in number. I am a proud member of this tribe. But within this tribe, very, very few people....I would suggest that I stand virtually alone...understood that the real problem was Japan's 0% lending, the weak yen and the Japanese carry trade.

Today's amazing news about the yen shooting up like a rocket against all currencies is proof that I am right! And more: the entire world is seeing stocks crash DUE TO THE JAPANESE CARRY TRADE CRASHING AND BURNING! As I predicted it would way long ago, in ancient times. Ah! This gives me a certain dark satisfaction. And the goddess of History lifts her feather and pauses while inscribing the past. She smiles grimly and laughs before resuming her story, 'The Decline And Fall of All Empires.'

(Bloomberg) -- American International Group Inc. has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount that exceeds the size of the original loan meant to save the insurer.

AIG may need more than the $122.8 billion now available to the New York-based insurer, Chief Executive Officer Edward Liddy said Oct. 22. The company, which agreed Sept. 16 to turn over majority control to the U.S. in exchange for an $85 billion loan, got access to an additional $37.8 billion this month. AIG's latest balance was revealed yesterday by the New York Federal Reserve, and is up from $82.9 billion a week ago.

``This emphasizes the uncertainty for anyone trying to put a number'' on AIG's cash needs, said Bill Bergman, an analyst at Morningstar Inc. in Chicago. The financial-products unit that caused most of the firm's losses ``is a big black hole.''

Nearly double the rescue amount! Will the entire $700 billion, minus the 10% cut off the top so AIG officials can party, will all of this end up in the Bottomless Pit?

Yes, it will. This is why the government should have siezed AIG, put the executives on trial and then shot them dead at Yankee Stadium, Chinese-style. This, in turn, would put real fear in the gnome community and cause them to hesitate before doing insane, stupid things in the future. Of course, we could be merciful and have them spend a lifetime in Sing Sing up the Hudson river. These people are Enemies of the State since they are bankrupting our government.

I am happy that Bill Bergman admits that AIG is NOT an insurance company but rather, a Big Black Hole. and this hole is in the Cave of Wealth and Death. Instead of ending risk and being a well-funded counterparty to any claims of losses, AIG is a loss leader, not a loss fixer. And this is due to them playing games whereby they pretended to be an insurance company while really acting like a piratical hedge fund.

As I said years ago, hedge funds no longer hedge. A hedge is supposed to be a support when things go bad in regular markets. Instead, hedge funds became this vile creation that were supposed to bring in bigger and bigger profits come rain or shine. So they did this by exaggerating whatever systems were being used, NOT AS A COUNTERBALANCE! If commodities began to rise, all the hedge funds would run off to the Bank of Japan for cheap loans in the carry trade and then use this to speculate in commodity markets. If stocks were rising, they bought stocks. If stocks were falling, all of the hedge funds would short stocks.

The wild, rocky, violent ups and downs we are seeing in stock markets, commodities, forex exchanges, etc are all amplified effects of a massive number of hedgers hedging harder and harder. The number of hedge funds exploded in the last 8 years and the dire efforts of these endless numbers of pirates has unbalanced an already grossly out of balance global trade/monetary system. And now, we are seeing the entire thing sink.

AIG's collapse has but just begun. The US efforts at saving it has now created conditions that may lead to the bankruptcy of our nation. Imagine that: an insurance company, thanks to them feeding everything into the maw of the Derivatives Beast, kills our nation? Like I said, we must put these people on trial. Not scold them at a Congressional hearing.

(Bloomberg) -- Treasury Secretary Henry Paulson is preparing to take stakes in a number of regional U.S. banks as he seeks to halt the freeze of credit to businesses and households, according to a person briefed on the matter.

The Treasury may announce the plans as soon as today, the person, who was briefed by bankers and Treasury officials, said on condition of anonymity. The purchases would be the second round in a $250 billion program to inject capital into financial companies, after an initial $125 billion was allocated to nine of the largest banks.

Why not cut to the chase: nationalize all our banking and then hand it over to the Chinese. They have the whip hand here, anyway. And they seem to be a bit more traditionalist when it comes to banking. If we are too queazy about arresting these criminals, let the Chinese army do it for us. We can continue to patrol Bagdad and the Chinese can patrol Washington, DC for us! A good deal, I think! Heh.

Seriously, here we are, losing our true sovereignty while Paulson struggles to bail out his fellow gnomes. He definitely should be arrested for conflict of interest, cronyism and conspiracy to strip the State of all our future assets. Ie: treason. By the way, the Chinese love this guy. I can see why. So do the Japanese.

``Yes, I found a flaw,'' Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. ``I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well.'' Greenspan added he was ``partially'' wrong for opposing the regulation of derivatives.
*snip*
``If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,'' Greenspan said. ``Forecasting never gets to the point where it is 100 percent accurate.''
*snip*
He later added that he couldn't respond to every warning. ``There are always a lot of people raising issues, and half the time they're wrong.''

Dear Mr. Greenspan: anyone looking at my blog going back to the beginning can see that my call rate is far in excess of 60%. It is very close to 100%. So why am I not running the Federal Reserve? HAHAHA. Actually, Greenspan is such a habitual liar, he exaggerates as usual. He is NOT right 60% of the time. He is right about 1% of the time which is incidentally, the interest rate he set back in 2002 in the hopes that this would create 'market liquidity' and enable more lending. We were deep, deep, deep in debt when he did this. And worse, we already had a savings deficit which his 1% rate made much worse.

No banking system can run for long if there is no domestic savings! Relying on foreign money to capitalize any banking system is suicidal. This should be carved into the tympanum of the Treasury building after the Federal Reserve is torn down and the directors put in prison. Now, just to prove that I am usually right, we go way back in time to the earlier days of my little blog, the old one at Blogspot:

The the longest time Americans have demanded the Chinese revalue their currency. No such demands are made with Japan who can't connect their perpetual depression with their perpetual currency game of constantly devaluing the yen by purchasing excess American dollars which we happily churn out and ship off to Japan. Since the Japanese hold much more of our debt than the Chinese, one would suppose we would be much angrier about their currency manipulations.

After all, it is Japanese cars that are killing our native car industry!

But, as usual, geopolitical games of Go trump mere domestic politics and we allow this to continue. On the other hand, our identical situation with China somehow ticks off everyone in our government!

Way back in the ancient days of yore, I was told by other economists to stop bothering them all the time about Japan. 'Start your own blog, ' I was told. So I did! And today's amazing news about the huge unwinding of the Japanese carry trade confirms that I, not they, was right about the true nature of global monetary systems and the highest importance of the Japanese Carry Trade!

China did control the value of the yuan by using the same FOREX reserve system Japan was exploiting. Both China and Japan were weakening their currencies so they could export more and have higher export profits. But China was also trying to raise the lives of the workers in China while Japan was crushing them brutally. China was raising interest rates and reserve ratios to control inflation while Japan was faking inflation statistics in order to hide inflation. Then, when inflation was obvious, Japan simply said, 'Go to hell, we want free money and the carry trade no matter what, our fake depression is great for growth and profits!'

So back in 2005, this infuriated me. And I was nearly alone back then, thinking about all this.

Like our trade deficit, in the exact same timeframe, starting in 1983 under Herr Ronald "Give me $2.5 million, please, Japan!" Reagan. He made a neat deal with Japan. To make our inflation disappear, the Japanese would soak up the red ink our government began to grind out that year to pay for the Laffer Curve tax cuts. Once this system was set up, it ran awfully nice, for FOREIGN POWERS. Others piggybacked into the system. I even explained how it worked to the Chinese so they could grasp what "traitor" means. They are in absolute awe of the propaganda machine that kept Reagan in power and popular even until this traitor's death.

No one has been able to pull our country out of this nose dive. Clinton and Rubins gave it a shot but hit so much flack, they had to give it up. This is because the bait: cheap interest below inflation and exporting of said inflation is just jim dandy for nearly everyone even as the downside to all this becomes increasingly obvious to even Republican right wingers. But like crack addicts on cheap speed, we can't drop the pipe or stop injecting.

You know what happens to crack/speed freaks. The become violent and end up dead.

The graphs and cartoons from back then are just as relevant today as then.

Here is yet another old, old story of mine. If Greenspan read my blog, he could have had a 60% success rate in his predictions.

The USA sucks up around 80% of all possible international funds of various sorts. This is to pay for the half trillion in government red ink and near trillion in trade deficits. In return, we printed money at an accelerated rate and now inflation is beginning to rage across the planet. Interest rates are shooting up and investment funds are vaporizing.

From the BBC:
The European Central Bank (ECB) looks set to raise interest rates in the light of rising inflationary pressures in the eurozone.
Economists are betting on a quarter percentage point rise in the cost of borrowing to 2.50% on Thursday.

The euro is the strongest currency right now so they don't have to defend it by raising interest rates alot.

Japan defends the yen by deliberately weakening it which is why their interest rates remain at a totally insane 0%. This is ridiculous since inflation is now raging in Tokyo according to on the street accounts. Even the prostitutes have figured out the dollar isn't worth what it was so even their prices are now climbing.
*snip*
All countries are exposed but none as much as the USA. Our rulers keep lying to us and claiming, the budget deficit is "only" 6 to 7% of our GNP which is of course, a very dangerous level but untutored people reading this information seldom realize what would happen if we can't get 7% of our GNP in the form of hard cash.

Crash/tinkle!

Since our GNP is so huge, this 7% is also huge! And since America has outsourced/outsized potential taxpayer's jobs, this means we can't fill this yawning gap by taxing the middle class. The rich can't be taxed at all since they rule us and they intend to keep things this way and besides, they squirrel away their money in off shore accounts, anyway. Since Americans can't tax the people with the money, this means cutting the budget by $500 billion not in ten years but next year. This is impossible unless our government either cuts the military to near zero or kills off most Americans who are dependent upon the government functioning.

Not one thing I complained about back then was fixed by any of the DC players who control events. Instead, we now see these same criminals trying to bail out their wacky economic systems by pouring in infinite US-Treasury/US taxpayer-backed funds into this Bottomless Pit. This pit is the home of the Derivatives Beast, of course. For the gnomes tried their best to make him infinitely bigger than the entire wealth of the entire planet! Again: this can only be fixed by punishing the people who did this. And negating the entire thing and starting over. With the humbled US and UK paying penance.

The stronger yen, falling stock prices and stagnant personal consumption have packed a triple punch to Sony's business operations.

Japan is now in very serious trouble. All that Japanese carry trade is being violently sucked back into the Bank of Japan. As I keep saying, NO bank should EVER be allowed to lend at 0% for even one hour! Much less, many years. Japan stuck to its 0% regime for over a decade. Now, this must unwind and it is a huge, huge unwinding. The US passively allowed Japan to flood the planet with amazing amounts of 'liquidity' which everyone turned into dollar products. This meant the dollar was far, far stronger than in reality.

I remember the whole business about the 'Floating Currency' even back in the seventies! Namely, it was supposed to tell us the real value of the dollar vis a vis TRADE. And the dollar fell against the Deutsche Mark and the Japanese yen! This was what Bretton Woods II was all about. And the Plaza Accords, etc. All were attempts at making the dollar weaker. Each time, we also promised to balance our budget. But we never did this!

And Germany and Japan both took advantage of this to increase their trade surpluses with the US.

So here we are: the Germans decided after Germany reunited, to rebuild the Holy Roman Empire with France. And both pulled the rest of Europe into the new euro regime. And the euro was not controlled by one power like the yen or yuan. So instead of keeping parity with the dollar, it began to climb relentlessly.

The rise of the euro and the Japanese carry trade are connected. Before, everyone concentrated on controlling the trade value of the dollar. Suddenly, there was a major new currency representing a huge hunk, now bigger than the US economy. And this unbalanced things. Let's look at what happened last night:

The dollar has fallen to 91 yen to the dollar. This is over 5% down in ONE NIGHT! Even more amazing, the euro has dropped to only 115 yen to the euro, an over 10% drop in one night! For many months, the yen dropped along with the dollar against the euro. Like a huge spring, this is unwinding rapidly, far more rapidly than the gradual drop. Whenever anything unwinds with a big bang like this, it is an indication of an artificial system breaking down.

(Bloomberg) -- The Polish zloty, Hungarian forint and South African rand headed for their biggest weekly declines as the global economic slump fuels concern of a worsening credit crisis in emerging markets.

The zloty fell 2.7 percent against the dollar today, taking its weekly decline to more than 16 percent, the steepest since Bloomberg began tracking the data in 1993. The forint extended its weekly loss to a record 14 percent while the rand fell almost 17 percent in its biggest five-day decline since 1975.

Iceland sank beneath the waves. Now, other small countries are doing the same. There are many, many of these poor places that will see their sovereignty vanish along with the value of their currencies. Zimbabwe went underwater long ago and was a stark warning sign that was as clear as the Weimar Republik hyper-inflation mess that presaged the coming currency collapses of the Great Depression.

The Asian Currency Crisis of the late 1990's was another warning shot. The repairs done to the system were correct back then. But applied ONLY to a handful of Asia economies. Not to the causes of that crisis which was actually in the US. Just like this mess is due to the US taking on too much debt, etc. Back then, the Asian Currency Crisis coincided with the US balancing its budget. The entire Asian system is based on the US overspending on all levels.

This is why everything is now unwinding: the US can't take on more debt. And the debt we ARE taking on is not for buying anything. It is all vanishing down this massive Bottomless Pit where the Derivatives Beast eats every penny and belches. Nothing is being bought or created. This is creative destruction with a vengeance. Indeed, this is very much akin to the ancient Chinese practice of burning worthless paper money to bribe Celestial Guardians at the Gates of Death.

(Bloomberg) -- Denmark's central bank unexpectedly raised the benchmark lending rate by half a percentage point to defend the krone's peg to the euro, threatening economic growth as the country teeters on the brink of recession.

Copenhagen-based Nationalbanken lifted the rate to 5.5 percent, it said today. The bank's mandate is to keep the krone pegged to the euro in a 2.25 percent band. In the past week, the krone fell 0.1 percent and on Oct. 13 fell as much as 0.7 percent.

``The krone has actually fallen slightly since they raised rates this morning, so they may have to raise again,'' said Jacob Graven, chief economist at Sydbank A/S in Aabenraa. ``One can't rule out an increase as early as today, or possibly in the coming days. Additional increases may well be larger than half a point.''

How bizarre. The US and Japan have both piled into the 0% rate boat. The US is still above 1% most of the time. But they are already planning to destroy the last of the savers in the US by dropping rates below 1%. I guarantee this. I know they will do this because they always do the wrong thing. If they are right 1% of the time, this is amazing. Forget Greenspan's boast about being right 60% of the time.

(Bloomberg) -- The pound tumbled below $1.53 in its biggest drop in at least 37 years after a report showed the U.K. economy contracted more than forecast in the third quarter, bringing the nation to the brink of a recession.

The decline surpassed that of Black Wednesday in September 1992, when the U.K. was driven out of Europe's Exchange Rate Mechanism. Gross domestic product contracted 0.5 percent in the three months through September, the Office for National Statistics in London said today, more than the 0.2 percent forecast by analysts in a Bloomberg survey. The FTSE 100 index slumped as much as 9.1 percent and the yield on the U.K. 10-year gilt headed for its biggest weekly decline in a decade.

``This is once-in-a-lifetime stuff, we're all sat under our desks with tin hats on,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. ``The U.K. is in the first step toward a recession and the dollar's bid because of repatriation flows.''

The pound is plummeting! Along with all the other non-essential currencies. Europe is very big yet the euro has dropped 10% against the yen! So of course, little England which is mainly a consumer society like the US, is being pitched overboard since the English have little room for more debt. And isn't big enough to resuscitate. The profits for Asia are much more slender than with the US. If Asia can prop up only a part of the global trade economies, they will prop up the profitable parts first.

All the major trade currencies that are also the biggest components of many national FOREX reserves are all collapsing against the yen all this fall and definitely last night. This is a clarion call that global monetary flows and trade are shifting dramatically! Here is yet more FX news that confirms that the Japanese carry trade has not only died but is now rushing home to roost:

The Australian dollar fell this week to the lowest levels against the yen in at least six years as investors sold higher-yielding assets.

The currency headed for its third weekly drop this month as Asian stocks slid on signs the world economy is on the brink of a recession. Investors bought back yen they borrowed in so-called carry trades used to purchase assets offering higher returns in Australia.

The dollar also fell versus the US currency as the price of commodities the countries export plunged on concern demand will falter.

``What you have is the global economy going down, commodity prices coming off and the old theme of global de-leveraging,'' said Thomas Harr, a senior currency strategist at Standard Chartered in Singapore. ``All of these issues are negative for the Aussie and the (New Zealand dollar) and positive for the yen.''

All the hedge funds that did the same thing in unison for years which was to exploit the Japanese carry trade, are now unwinding simultaneously as they all try to cope with the Derivatives Beast's messes. They need cash. Not more loans. If we want to pursue the cartoon system I run here, what is happening is simple. The Derivatives Beast doesn't want more Japan carry trade loans. He wants real money. And this means getting the major governments of the world to feed him real meat and potatoes: future taxes, the wealth of empires.

TOKYO (Nikkei)--The Japanese currency accelerated its climb against the greenback Friday evening, briefly hitting 90.89 yen to the dollar, rising to the 90 range for the first time since August 1995.
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Nomura Continues Global Quest As 'Last Investment Bank'

TOKYO (Nikkei)--As Nomura ramps up its bid to become a major player in global investment banking, about 8,000 former Lehman Brothers employees are on board, ready to contribute their M&A and underwriting expertise to the effort.
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Crisis Chokes Sony Profits, Demands Strategy Makeover

TOKYO (Nikkei)--The accelerating downward spin of the world economy is biting deeper and deeper into Sony Corp.'s (6758) profits, raising serious questions about the future of the electronics giant.
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Clearinghouse For Credit Default Swaps Seen Spurring Transparency

TOKYO (Nikkei)--The proposed establishment of central clearinghouses for derivatives products is gaining traction amid a growing search for ways to boost the safety and transparency of such instruments.
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Stocks: Nikkei Slumps To Near Post-Bubble Low On Surging Yen

TOKYO (Nikkei)--Tokyo stocks accelerated their decline toward the closing bell Friday, leaving the Nikkei average to close just above the post-bubble low marked in April 2003.

First: Japan is hiring all those Lehman Brother people who helped create and feed the Derivatives Beast? HAHAHA. Talk about taking on a plague ship's cargo of rats! Second: the biggest profiteers on earth during the long Japanese carry trade decade were Japan's exporters. All the EU and US got from this cycle was epic debts and a loss of global trade shares. Third: CDS will NEVER be 'transparent'. I would say, it is slowly revealing its true nature as it appears inside of banks, eating up all wealth of the planet and anything the various desperate governments feed it. Fourthly: as per usual, when the yen goes up, the Nikkei goes down. Japan allowed this dynamic to be far to predictable.

Smart investors or people reading my blog have learned this years ago. I constantly remind people of this. Want to get rich? Short Japanese stocks whenever the yen rises. This is a danger for any system: when it becomes too obvious and everyone plays the same game, this destabilizes systems very rapidly and they die. Time to visit the past again, this time, exactly one year ago:

The world financial systems may be slipping but the effects in Asia are quite different from the effects in the US and England. Time to discuss this. Once again, we have to discuss the stupid, outrageous inflation statistcs created by our rulers. These are designed to cheat savers, retirees and anyone worried about relative value of their finaces. On top of the new FX trade system and monetarist philosphy, this system is rotten to the core and the destruction it is causing will become increasingly clear as things deteriorate.

From the BBC:

The world's wealthiest private investors are planning to put more money into alternative investments over the next three years, a report says.
*snip*
It found that only 48% of respondents planned to buy further investments in stocks over the next three years, down from 64% over the past 36 months.
*snip*
By contrast, 15% of respondents said they planned to invest in private equity funds, up from 11% over the past three years; while 21% said they expected to invest in hedge funds, up from 20%.

This article also noted that many of these 'rich' investors don't have the foggiest notion, what they are doing. They are simply looking to find the easiest place to park their money and then sit passively by while it grows. The hedge funds are not growing at the rate they grew just one quarter ago, they are off by about 30%. But they are still growing. There is always this business in money flows: the people in the know are the ones selling to lower level people and for the last six months, the top hell hounds have been trying very hard to convince people who can't read charts or understand the elements of world trade and money manipulations, to buy.

Just as the top bulls on Wall Street will talk up stocks when they know perfectly well, it is a bear market. They need to shift their funds and to do this, they need other people to be fooled into buying. They knew every bit as I knew, that the Bernanke helicopter drop didn't fix anything. But they also knew that if they sold this as a solution, many people would flood into the market and buy which means they get customers.

So it is here: stocks shot up before the announced rate cuts. Then, the market has gone on to higher highs. But note that there are intersperced huge falls. Up 200 pts, down 350 pts, up 100 pts, down 50 pts, etc. This is a classic see/saw movement we often see at peaks. The smart guys can see we are about to take a classic tumble. They are clearing out their own stocks while staking out some territory elsewhere. This has caused the price of bonds to fall since this is one Safety place people park funds whenever Risky crashes into a brick wall.
*snip*

From the Nikkei:
Winter Bonuses At Major Firms Up For 5th Year In Row: Keidanren
TOKYO (Nikkei)--Bonuses are set to increase for the fifth year running at major companies this winter, the Japan Business Federation, the influential business lobby that is better known as Nippon Keidanren, reported Wednesday.

The peculiar depression in Japan rolls onwards. As we see a mirror image of the US system: fake interest calculations used to keep interest rates well below the rate of real inflation and huge bonuses for the upper tiers of the industrial/financial systems. For 5 years, the Japanese who keep the LDP in power have rewarded themselve increasingly while the workers get less and less and less. This corkscrew system also keeps Japan's imports down so they can run this surplus. I will note that the other G7 nations won't talk about this in public. We used to hear about it all the time since 1974!
*snip*
As I said, the yen was going to rise because the Japanese openly boasted they could make the yuan rise in value while the Chinese couldn't make the yen rise in value. In the news, they will pull all sorts of reasons for the yen's rise out of their hats but of course, up until now, all these things were obvious and the yen went down. We keep forgetting, China and Japan are trade rivals and they aren't just fighting over US market shares but also Asia and Europe. For a while, China raised the value of the yuan to please us but has been rather ill tempered about this as they saw the yen drop. So they have been moving since July, to raise the value of the yen. Back then, the Japanese boasted the yen would be 130 to the dollar. Hahaha.

So we will see this battle continue. The Chinese don't mind the yuan rising against the dollar so long as the yen rises against the dollar even more.

From Market Watch:

Japan's trade surplus climbed a higher-than-expected 62.7% in September from a year earlier, as continuing strong export growth to Asia and Europe offset weaker U.S. demand.
Exports rose 6.5% in September from a year earlier, easing from 14.5% growth in August, the Ministry of Finance said Wednesday in Tokyo. Imports declined 3.2%, marking the first contraction since February 2004.

September's trade surplus hit a record 1.638 trillion yen ($14.28 billion), the ministry said. Shipments to the U.S. declined while those to Europe and China expanded at a slower pace.

As I said before, the international trade game is now all about monetary manipulations allowing one way trade. Right now, the target nations are the EU. The Asian traders know that England and the US are nearly tapped out or over-developed now and they are fighting over Europe's markets. Both China and Japan are now holding EUROS more than dollars. Because the dollar overhang is so gigantic, it was the vast majority of the money they are holding, the percentage is still relatively small. But we can sense the shifting of the gears here. Even as the yen and yuan rise against the dollar, they have fallen greatly against the euro. And Europe is feeling this quite strongly. This is why their inflation rate is much lower than Japan, China and the US. If we use real statistics like the price of oil.

As far as I am concerned, the only thing that has changed since last year is, the dynamics downward have increased, the powers pushing up the yen and killing the carry trade are increasing. The world appears to lack liquidity only because the amazing flood of free funny money from Japan has totally shut down and the reverse has happened.

This is a classic Libra moment. As she steps down and we enter Scorpio, we get her deadlier sister, her ancient Egyptian twin, the poisonous one who lives under rocks. When I was a child, I learned swiftly to never pick up anything but to kick it first to see if there is a scorpion hiding there. I also used a knife in the outhouse on Kitt Peak [before there was plumbing] to stab these bugs before they bit me. I would cut them in half.

And so it is here: we are in new dangers but within this system is hope. Namely, that finally, despite all the efforts of everyone at the top, the goddesses will force everything into balance no matter what. And in balance comes health, growth and strength! For the present system is very bad for many people and will not end nicely. It has to end, anyway. Might as well do it before we all blow ourselves to smithereens.

Comments

I haven't read all of the article yet, but since you mentioned trying to "germinate" some cartoonry for derivatives, I figured I'll throw out some thoughts that may or may not be of any worth....oh well.

OK, best I can tell, the derivatives are like a way of trying to put risk "off to the side" or in an imaginary bag and then "pretending" the risk went away (the individuals doing the pretending are the ones whe have been benefiting financially from derivatives so far - the rest of us couldn't really even pretend about them because they have not been in the "public consciousness". Anyhow, the pretending should be over by now because the risk never went away, in fact, the risk was simply being lumped together and actually concentrated. Now because the risk is lumped together, it collectively ends up being more risky on a large-scale. Had the individual risks been kept separate they would have manifested and then been dealt with individually, but instead the derivatives were utilized as a way of "putting off risk" and "profiting from this" with the main effect being to "exponentially increase the risk" over time for everyone. I mean everyone.

The derivatives are mainly paper creations of imagination, but per the contractual terms on the paper the derivatives do connect with real world physical items (houses, treasures, equipment, commodities, other derivatives, etc.) The flawed logic of the derivatives (or maybe not if you think derivatives have been "great") now is not only causing financial havoc, but it creates a huge impetus that highlights flawed logic in other areas and within other institutions of power and influence. Many of these "areas" and "intitutions" are flawed for many reasons not the least of which is that they allowed (and perhaps encouraged) the "Derivatives Beast" to be formed and to grow immensely. Many of them did this for short-term personal gain.

From an "imaginary" standpoint the "Derivative Beasts" might as well be infinite at least when compared to the suface of planet earth and the real world wealth it presently offers for humanity.

I think of it in some ways as "potential energy" that has been slowly but exponentially building (a spring being pushed to the limit perhaps or a water ready to go over the fall...). This potential energy may tap into other sources of "grand" energy, and may even be sufficient to activate even more potent forces. This could be an opportunity or it could be an uncontrolled release of energy beyond the capacity of the planet. I vote for the opportunity route myself.

Well, I want to read the rest of this. Sorry if the above didn't make much sense. It does to me...sort of!

Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

***snip
Jerome Fons, a former managing director of credit policy at New York-based Moody's, told lawmakers that originators of structured securities ``typically chose the agency with the lowest standards, engendering a race to the bottom in terms of rating quality.''

Elaine,
You were right! You understood what no other blogger did.
You referred to hell money. I thought you might get a kick out of this, from Wiki:

"Hell bank notes are a special and more modern form of joss paper, an afterlife monetary paper offering used in traditional Chinese ancestor veneration...Hell Bank Notes are also known for their outrageously large denominations, ranging from $10,000, $100,000, $1,000,000 or even $500,000,000. In Singapore, it is extremely common to find 10 billion dollar banknotes in shops. On every bill, it features an image of the Jade Emperor, the presiding monarch of heaven in Taoism and his Western signature (Yu Wong, or Yuk Wong) countersigned by Yanluo, King of Hell (Yen Loo). On the back of each bill, it features a portrait of the bank of Hell."

And the best part:

"The most well known and commonly sold Hell Note is the $10,000 note that is styled after the old United States Federal Reserve Note."

I am still getting the feeling that the US is coming out of this with its hegemony intact. Notice that thanks to 'spreading the risk' and 'globalization' most of the worlds other economies are getting hit worse than the US!!
As for Japan we all knew years ago that 0% yen was just a subsiduary of the US printing press, yen = dollar.
And as for the anti -gold people , where do you put cash?I notice most of the discussion on Denningers is about which bank is safe , good luck!

The gnomes got one thing right, this trainwreck is going to effect everybody, whether they participated in the orgy of debt or not.

Unfortunately they got the part WRONG where they said they could fix it.

The BIG PICTURE is mesmerizing. Like watching the holocaust of 9/11 on teevee, but peoople need to understand this has PROFOUND immplications on them as individuals.

So far the only people who have felt the IMMEDIATE effect are the ones who are losing their houses and jobs, and the minor pain of rising food prices and previously gas.

Economic collapse (maybe more correctly disintigration) for a global economy will bring real pain and suffering with it.

Today we read about Santa Monica cutting essential services since they are broke and cannot borrow to sustain them. Ships are not loading and shipping goods because shippers fear that Letters of Credit will not be honored when goods arrive. That's OK if you are talking about iPods and flat screen TVs but less good if it is an essential commodity. We are really circling the drain here.

The recessionary spiral is less money spent on consumption, job cuts, less consumption, more job cuts, etc...

We squandered our savings, stripped our productive base, and are not self sufficient in natural resources. Our future labor and lives are being thrown into the mouth of the beast because THAT is what real money is after you have no savings, no resources, and no means of production.

If it all collapses or disintigrates or whatever the people who crawl out of the rubble first are the people with natural resources (or control of them), means of production, and capital. The ones with these capabilities are the new masters of the universe.

In a sense it doesn't matter who that is beyond the fact that it ain't us.

Dont be fooled by $2.50 gasoline. USA is bankrupt as Eliane has been saying for years. This is the END of Dollar Hegemony. There are serious issues at the ports with respect to manifests and lines of credit. There will be SHORTAGES of certain things. Plus, the foreigners will now attack the dollar and T-bills. This dollar surge is not a FLIGHT TO QUALITY. It is BANKRUPTCY RECEIVORSHIP!!!

"like a way of trying to put risk "off to the side" or in an imaginary bag and then "pretending" the risk went away"

Google search: "TRC Exit Strategy AIG Environmental Insurance" for more fun! (TRC = TRR on NYSE) USEPA will be thrilled, no doubt. Multiply these by hundreds at least for the number of other contractors and projects getting that insurance from them and then multiply by the $ in limits of liability on the aggregate of all such insurance over the years = $billions in a relatively tiny niche.

When England went bankrupt, there was this period from 1919 to 1929 when the global trade basis was vacillating between the pound and the dollar with the dollar winning more and more trade transactions.

Then, when the pound was rapidly becoming useless, the British dropped the gold peg right after Germany declared bankruptcy and refused to pay any more reparations.

This caused a RUN ON US DOLLARS as all the remaining trade rushed to the only secure gold currency on earth: the US dollar.

This destabilized our own currency and by 1933, we had to drop the previous gold peg and start a new one! Our entire banking system collapsed.

But we came out of the Great Depression much stronger than anyone on earth due to our lovely tariffs and barriers. Otherwise, all nations would have flooded us with their exports based on the new dollar!

I know that some of the Chinese leadership listened to me when I discussed the false reading of the Great Depression that blamed the US tariffs for the English/German/French bankruptcies. I try to hammer into everyone's heads that ALL nations MUST EXERT SOVEREIGNTY when there is an economic meltdown. Not the opposite.

Any nation stupid enough to try to keep any dying status quo alive when an empire dies like ours is dying, gets destroyed. For we can thrash about quite nicely. We are big! The sun is setting on our global empire just like it did when it set on England.

Thanks for the reminder of one of the many derivatives schemes which were launched to make money off of cleaning up the environment. This was the actual beginning of the beast: a woman who was a computer genius thought it would be a lot easier if people played betting games on risks connected with costs and overhead problems, with pollution CREDIT TRANSFERS.

These 'credit transfers' were when a rich country would 'buy' the amount of pollution a poor country would have it if were industrialized, and then use this invisible thing to pollute! While claiming, they were NOT polluting!

I hated that system from the get-go and periodically return to it to snarl and snap. Well, it has destroyed the global economy, thank you. And did absolutely nothing about pollution reduction in the real world.

Nice article, have a look at the Elliot Wave guys from the late 90's and "Conquer the Crash" 2002.

One thing that you might also want to consider is that China is about to implode, the fuse has been lit and big banks and their cooked books of non-performing loans are going to consume China's foreign reserves - it's not only the toy companies that are going broke over there as we speak.

Funny you should mention the crickets, they are one of my favourite pets, which I keep to remind me of things and they are chirping now.

Who will buy US Treasuries, why the World of course, and they are. With Argentina and Russia on the verge of default, the carry trade unwind and the Fundies deleveraging killing the commodity currencies the only safe currency left is the USD. Go figure, but you know what this is part of the great plan. The panic stricken mob will stampede into the canyon, towards the safety of the fort USD but not noticing that the end of the canyon actually fell off the cliff and the safety of the USD was but a mirage. The rug will be pulled, this is the plan, the crickets told me so.

Elaine, that is a fascinating connection between derivative schemes and pollution credit transfers. If you have already covered it I would appreciate an archives link. If not, considering it as a future discussion would probably be read by many with great interest.

Naked short selling and float and reserve plays are causing a record 'failures to deliver' in the US Treasuries markets. Some of this may be a 'kiting' scheme in which the sellers are playing an aribtrage against the slight fees and penalties versus returns on price distortions and extremes in volatility.

Or it might be a case of selling and using the same thing so many times as collateral that you don't really know what is your actual condition, solvent or insolvent. We can think of several (roughly nine) derivative and instrument laden banks that are utterly insolvent if forced to deliver their net obligations.

The Fed cannot even regulate its own products among its own dealer circles. What could possibly possess anyone to believe that they can do this with any other product in a larger, less exclusive market?

You might want to contemplate what those "things" are there there might be shortages of.

I was in New Zealand a few years back (lovely country, nice people) and I had to pay MORE for crummy New Zealand apples in a grocery store in Aukland than I was paying at a grade A apple at a crappy little SuperS that was the ONLY grocery store in the rural town of 5000 or so where I lived in Texas.

THATS the power of the world reserve currency and the biggest consumer market on the planet. I paid less for an apple that was shipped literaly half way around the world than I paid for it in the country that it was grown in.

We grow lots and lots of food here (yeah), but if the dollar craters we are going to be SELLING a lot of it for whatever currency we need to to buy all the MANUFACTURED crap we import AND oil.

The British Empire wouldn't let the colonies build up a manufacturing base. They wanted the RAW materials that they imported to Britain and then manufactured into products (added value) and sold them back to the colonies. It was a neat system for keeping the colonies poor and enriching the empire. This was part of what the Revolutionary War was fought about (and TAXES). Does anyone see the irony here?

Elaine, thanks for the earlier tip on the Japanese Yen. I wish I could have bought more. By the way, it's very easy to buy through FOREX.

All of our institutions have utterly failed us in this crisis. The politicians are bought and strive to bail-out the status quo. Homeland security attacks our freedoms by offering insecurity.

Most of our religions are miserable failures in pursuing zionism and religious hatred instead of reminding us about usury lending and the need to treat others as we want to be treated.

We are constantly divided by race and religion. The solution seems to always be more social engineering that compromise our freedoms.

The globalists attempt to remove freedom as far from the individual as possible - to an ever larger group. This they claim is an evolution of society to consolidate all power and choice in the hands of the few.

It seems at times like the problems are overwhelming in our world. But, I want to make sure everyone understands that we have an alternative to tyranny and corrupt institutions.

I hope we will all unite in striking a blow to the beast. We need to abolish the Federal Reserve in the US. When the Fed falls, the other corrupt institutions will either reform or fail like dominoes.

On November 22, 2008 there will be protests at all 38 Fed banks and offices. We all need to participate as this will just be the kick-off for an ongoing effort to educate people as to where our money comes from. When people begin to understand that we have no control over the fed; they will at once begin to realize the fed controls us.

END the FED
11:22:08
http://www.endthefed.us/

Ron Paul gives his take on the Greenspan congressional hearing on CNN:

We are back around the time of Lehman collapse again. total global panic in stock market.

so much for $3T bailout. Iceland, Ukraine and Argentina are gone. Russia and Korea are being attacked by wall street pirates. (I swear we would better off if Russia nuking the remaining hedge funds using real bomb)

...watch the global stock market and interbank rate. they are in even worst condition than after Lehman now.

Watch for the "witching hour." There have been steep sell offs of the stock market at the end of the trading day on Fridays lately when the overall day was down.
Dow was down about 400 points last I looked. If it closes below 8000 some smart people think it will head A LOT lower.

I hear that Panama is really nice this time of decade. Funny thing, Panama has no central bank, no currency control laws and no inflation. Must be why there are so many illegal panamanian immigrants in the USA.... errr why there are so few maybe.

Panama is now owned by the Chinese. Being creditors, they can buy and hold. We are having a global fire sale of our own sovereignty, our currency and our political power.

By the way, I don't like crickets that much. I feed them to the chickens and the duckies. Who love to eat them.

As for Big Bang's answer to my question, who is this 'world' that will buy our debts once we screw up all the present debts we owe and basically tell our creditor pals to push up daisies?

Iceland won't be buying. Maybe the 'world' is Japan? Tokyo will save us?

HAHAHA. I have said repeatedly in the past when we ran a $500 billion national debt annually, 'Japan can't support the US debt alone, Japan NEEDS China and Saudi Arabia!'

So we try to hose the Bank of Japan and the government there with this year's TRILLION red ink from DC? Gads! Japan is one of the most deeply in debt nations next to the US, UK, Germany and France! This is impossible.

The Treasury has used only capital powers so far to aid federally regulated institutions. But the TARP program could be used to buy sour assets from other financial companies and help them scrub their balance sheets.

MBIA Inc, the largest U.S. bond insurer, and its No. 2 rival, Ambac Financial Group Inc, met with regulators earlier this week to push for a way to tap into the federal government's bailout plan.

OK - here is another image for the "derivatives" - they are being pushed like a vapor into a balloon with the volume of the flow increasing exponentially - the ballon, like everything else in the universe, can only handle so much pressure - the balloon is bursting (sort of like a damn) and a lot of energy is being released - stored up energy as supplied by the derivatives.

Even infinity is limited in time.....

As for crickets, I've always appreciated their chirping - but I suspect they do make good chicken feed.

oh, sorry about that "double" peace, sometimes I edit my message as I'm typing and forget what I have at the end....

All I know is - I VOTE for opportunity as opposed to massive release of uncontrollable energy. Its so much better than wallowing in pity....or feeling everything is hopeless. I wouldn't even say this except I know folks who feel this way. How sad.

AUSTRALIA'S mortgage fund industry has dramatically succumbed to a flight of money to government-guaranteed bank deposits, with four of the biggest five fund providers suspending withdrawals.

** snip

The Government last night appeared unable to resolve the cascading problem, with Treasurer Wayne Swan advising those affected to contact CentreLink to see if they were eligible for temporary support.

"These are not deposits in a bank, we are dealing with market-linked investments," Mr Swan said. "The Government is not in a position, and never can be in a position, to provide the same guarantee to market-linked investments as apply to the banking system."

"Washington might well worry about who lost Taiwan as a major investor in U.S. agency securities as the Republic of China has openly questioned their credit quality -- even after the federal government has committed hundreds of billions of dollars to bail out mortgage giants Fannie Mae and Freddie Mac."

"The Taiwanese action is a blow to the reeling U.S. mortgage market, which has been supported by the Republic of China's purchases of agency securities. According to U.S. Treasury data, Taiwan owned a very substantial $55 billion of U.S. agencies along with $43 billion of Treasuries as of June 30, 2007, the most recent date for which these data are available."

http://tinyurl.com/6q6jh3

_______________________________________

CK-

Panama is a nice place - low taxes, privacy in banking and investments, relatively low rent and lower home prices. There are lot's of americans, canadians and a number from other "western countries."

I have tried to talk my wife into considering a move to safe haven like Panama, Costa Rico, St. Kit, Jersey Islands or Honduras - but she won't consider leaving our families. It's only a jet flight away but I guess it would feel a lot farther.

The Asian Dollar Crisis '97 could be the model for the collapse of yen carry trade. The yen goes back to Japan and those on the short end - ends up like Indonesia or Iceland within weeks. That is what happened in Indonesia but the currency then was the USD. G7 will be toast if they can't stop the Yen from strengthening. It'll be every nation for itself now. IMF can't stop this scale of disaster from unfolding globally within such a short space of time.

"long as we have weapons, technology, land and useful assets to sell them, but the time will soon come when they will be peddling them to us. In the meantime, how big is the derivatives monster that is going to destroy the world's economic system?

Well, the estimate from (as I recall) the International Monetary Fund is that the global total of derivative contracts outstanding is $1.125 quadrillion, whereas global gross domestic product is about $50 trillion, although both numbers are so big that I couldn't make any sense of them even if I was sober, and being sloshed, I revert to more primitive responses, like screaming in fear and holing up behind the massive blast-proof door of the Mogambo Bunker Of Raging Panic (MBORP).

Only here, safe amongst gold, silver, guns, frozen pizzas and stacks of adult literature of the "Hot, Nasty Ladies" variety can I finally relax enough to calculate that to make this $1.125 quadrillion yield even a lowly 1%, it would take $11.25 trillion just to pay the interest! Hahaha! We're freaking doomed! A quarter of global GDP is needed just to pay a 1% yield!

I am laughing hard at this one example of the stupidity of the American school system that anybody in this country could possibly believe such a thing could work! In fact, I was going to use the line "It Ain't Gonna Work", but I see that that title had just been used by Tim Wood at FinancialSense.com, who uses it to say "manipulation will ultimately not work" and that it will "make matters worse in the end. Yet the Fed, the Treasury and the politicians continue to think that they can 'fix' the problem by throwing more money at it. They do not understand that they can't 'fix' this economic crisis. They also do not understand that it is their trying to 'fix' things in the past that has created the current situation."

He says that Nikolai D Kondratieff, the tragic Russian economist of the early 20th century, has foreseen all of this before, and thus, "What we are dealing with is the wrath of Kondratieff Winter, which is about the purging of excess credit. Along with that comes deflation, and along with that global stock markets enter into extended declines. Real estate declines, economic growth slows, commodities decline, bankruptcies accelerate as the excess credit is purged from the system, the banking system is shaken, the free market is blamed and we move toward national fascist political tendencies."

Ominously, he sums up with "We are now seeing each and every one of these symptoms of K-wave winter."

One of the symptoms he did not mention was the intellectual corruption that spews from the Fed, such as the recent decision of the Fed to pay banks interest on their deposits at the Fed! Hahaha! And where in the hell will the Fed get the money to pay all of this interest money? They will create it, too! There is more money everywhere! Hahaha!
"

Congratulations on the birthday of your husband
Elaine.
To the other poster:
I am not so sure about staying at New Zealand
heck not sure about Australia either. It is all linked together
What is happening to the bond and commodity markets? We are in for tough times no matter where in the world we are

I've been reading your site for many years, and you deserve a Gold Medal in Economics. What surprises me is how surprised most Americans are to all of this, this is simply history repeating itself. All empires who wage wars and have criminals in charge all end the same way, the only reason we have not so far suffered any of this in Quebec and Canada where I live, is that we have a minority government in both Provincial and Federal levels right now. So the current criminals in power are paralysed to do anything, that is what the U.S. needs a third party. I think you would make a good party president.

By the way, I don't like crickets that much. I feed them to the chickens and the duckies. Who love to eat them.
*******************************************
If crickets make too much nonsense noise, we will eat them too. Hahahaha........

Dragon, sounds like the crickets are about to be served up for dinner:

[The People's Daily is the official newspaper of China's ruling Communist Party... "The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

"The U.S. dollar is losing people's confidence. The world, acting democratically and lawfully through a global financial organization, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote.

Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account...]
http://tinyurl.com/5mxeaq

At the end of the day all everyone has to do is sing the same song, and tell the goon squad that we do not want to play with you anymore. You had your chance and you went and screwed everyone, including and most specially your own. You want to play, our rules.

Btw, off topic and going back to a thread a few posts back, was a question on "how to boycott the elite". Found another link that might be of interest to those of the same persuasion. They are pretty well organized and just need to reach critical mass. I am starting with my Citibank credit cards. Check out: http://www.karmabanque.com/